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Tuesday, 3 April 2018

‘Federal government has lost $235 billion due to delay in passing the PIB’

Issues about the protracted petroleum industry Act in Nigeria have over the years refused to let go, possibly because of the overwhelming public and private interest in the sector. It was on account of this that the need to have a Petroleum Industry Governance Bill passed first became imperative. Chief Emeka Okwuosa, an oil and gas lawyer and the Managing Partner, The Chancery Associates, Lagos in this interview with KINGSLEY JEREMIAH, discussed legal aspects and emerging global issues in the industry.

How should oil and gas players in Nigeria engage in emerging technologies such as blockchain, which are projected to disrupt the oil and gas sector?
First of all, Blockchain is an open, distributed ledger that can record transactions between two parties efficiently, and in a verifiable and permanent way, provides a singular network, with a constantly increasing list of records that are referred to as “blocks”. The block is considered very secured since every record is time-stamped and encrypted. As regards to the energy sector, blockchain technology can assist in reducing transaction cost by maintaining a single logical copy of transaction records which would help the sector avoid the need for reconciliation and settlement, thereby a potential game-changer for the energy sector. Blockchain could also lead to increasing database and trading efficiency, improving transparency and compliance, addressing cyber threats and even improving the supply chain, through more seamless contract management. Moreover, the Nigeria oil and gas sector is plagued with issues of accountability, transparency, and efficiency and could greatly benefit from this technology. There is the need for the government of Nigeria to drag its feet in embracing the new technology due to the fact that a lot of issues that borders on transparency and accuracy of record, honesty and sincerity in terms of keeping records will be disclosed. However, this goes beyond the security of the government but more on what is trending in the global economy. I would conclusively say that one of the cardinal aims of PIB is to make for more accountability and transparency and one big problem with NNPC is that its operations is opaque and the blockchains will bring about more openness, transparency and accountability in NNPC operations.

How would you rate the issues of transparency, accountability and corruption in the oil and gas sector in Nigeria, especially under the Buhari administration where anti-graft war is a major agenda?
In my own opinion, the issue of corruption in the oil and gas sector in Nigeria has become systemic and the scourge cannot be dealt with easily. It is not possible for the issue of corruption to be dealt with in one full swoop and trying to deal with it is certainly not a walk in the park. However, under President Muhammadu Buhari’s administration, the issue of corruption has been substantially dealt with. The whole essence of PIB and the procurement process in PIGB and other parts of PIB are geared towards curbing corruption to an extent. I would advise that the federal government should work very hard to strengthen due process in the oil and gas sector. The whole essence of PIGB, Tender and Procurement Process is aimed at trying to solve corruption and block all the holes and leakages, which significantly improve transparency.

The aggressive push for green economy by several countries is projected to have grave consequences for governments and operators in the oil and gas sector, how can Nigeria prepare for this?
It is necessary to define the term “green economy” before delving into the question. The term “Green Economy” means an economy that aims at reducing environmental risks and ecological scarcities as well as sustainable development without degrading the environment. It is basically about sustaining and advancing Economic, Environmental and Social well-being. The whole essence of green economy trend will entail far reaching changes that will pervade the whole gamut of the oil and gas industry and beyond and will include inter alia; zero tolerance for gas flaring, oil spillage and pollution, introduction of electric cars, total ban on cars that use diesel and all these will culminate to a collapse/reduction of our income from oil which is Nigeria’s main export earner. I think Nigeria can cope with the above-mentioned modules of green economy by diversification of the economy thereby making it less reliant on oil earnings. I would strongly recommend that the federal government take bold proactive steps to diversify the economy and make it less reliant on income from oil to be able to survive and absorb the inevitable shocks of a green economy.

There seems to be good news on the state of the Petroleum Industry Bill with the governance aspect urgently receiving attention. What are your expectations? Do you think we should roll out drums and start celebrating that the reform we canvassed would eventually become feasible?
I will start by commending the current administration of President Muhammadu Buhari for having adopted the approach of unbundling the PIB into the following bite-sized bills to enable timely engagement, review and facilitate expeditious passage by the National Assembly. It is worth noting that the Petroleum Industry Governance Bill (PIGB) is the first part of a larger piece of legislation known as Petroleum Industry Bill (PIB) to pass through the National Assembly and is awaiting the assent of the president of Nigeria to become a law. It is imperative to note that the PIGB is less robust and has less scope than the original PIB as it does not delve into areas like fiscal framework, gas framework, host community issues, etc. The Petroleum Industry Bill debated over a decade was created into sections to help pass it into law more easily. Both houses have approved the PIGB, which is a component part of PIB and all it requires now is the signature of the president for it to become Law. The Petroleum Industry Governance Bill creates four new entities whose power will include the power to conduct Bid Rounds, Award Expiration Licenses and make recommendations to the petroleum Minister on Upstream Licenses. Furthermore, the PIGB deals mainly with governance and institutional framework for the petroleum industry, and seeks to establish bright lines between policy making, regulation and commercial activities. Similarly, it also seeks to engender value addition, transparency, accountability and a shift towards optimal profit creation for Nigeria’s petroleum assets. In this regard, the PIGB attempts to allocate roles and responsibilities to the various institutions regulating the industry. I think the passing of the PIGB is the way forward and a step in the right direction. However, the Federal Government has to pass the other components of the PIB to complete the picture and set the oil industry on the part of sustainable growth and progressive future.

If PIB becomes law, do you think Nigeria is prepared to handle all the emerging issues that may come with it, especially from the legal point of view?
I strongly canvass that the PIB should without delay be passed into law due to the fact that it addresses and provides solutions to several issues militating against the oil and gas sector in Nigeria. I think Nigeria is prepared to handle all the emerging issues that may come with it, this is akin to the fact that the new PIB will be a single, all embracing, and comprehensive document that will change the whole gamut of the petroleum industry in Nigeria. I would advise the Federal Government to pass the PIB expeditiously. It is estimated that the federal government has lost $235,000,000,000 due to delay in passing the PIB. The federal government should now walk the talk by speedy passage of the PIB.

How is your company positioned to help address the challenges in the Nigeria oil and gas sector?
Our client s are predominantly multinational and international oil Companies. Our narrative is to provide solutions to the ever-growing and expanding myriads of problems our clients face in the oil industry. We possess expertise in all areas of energy sector and our understanding of this constantly evolving energy sector and the language/dynamics of the oil industry places us in a better position to provide our clients with exceptional and comprehensive solutions diligently and expediently. In all our endeavors, we hold ourselves accountable to the highest standard of professionalism and this attribute helps us to offer our clients unique and qualitative service in all aspects of law where our advice is sought. We strive to help our clients realize the full potentials of their businesses with quality and prompt service delivery.

Gas is said to be a major lead as the Federal Government plans to attract over $100 billion investment to the industry. Do you think Nigeria has a favorable fiscal regime to attract such investment?
I believe that Nigeria has a friendly and favorable fiscal regime to attract investment in the oil industry. On June 28 2017, the Federal government ushered and approved the new National Gas Policy which clearly defines the direction for gas infrastructure ownership by prescribing full legal separation of gas infrastructure ownership, operations and trading. The policy is geared towards harnessing Nigeria’s vast gas resources by removing the barriers affecting investment and development in the gas sector. If properly implemented, it will drive the institutional reforms and regulatory changes necessary to evolve into a gas based industrialized nation. I would like to say that the federal government offered a Gas Policy aimed and calculated at making Nigeria a Gas hub in the West Africa Sub-Region with its variety of incentives and tax reductions. Therefore, it is incumbent on the federal government to get the right balance between attracting investors and positioning the country to reap the benefits of a gas superpower in the West Africa Sub-Region.

Relatively, we have seen hostility against oil and gas operations in the Niger Delta. Do you think there is any other thing to worry about from the region?
Well, I think there is nothing to worry about from the region due to the fact that the new PIB strives to give host oil producing communities such as Niger Delta a renewed sense of belonging in the oil and gas industry. The Petroleum Industry Bill provides for the creation of a fund to be known as the Petroleum Host Communities Fund (PHCF) by which companies engaged in the upstream petroleum operations will be required to remit 10 per cent of their estimated net profit to the fund on a monthly basis, to be utilized for the development of the economic and social infrastructure of communities within petroleum producing areas such as Niger Delta.

Henceforth, host communities will be equity stakeholders and hold a 10 percent equity stake in profits from oil produced in their areas. The new PIB will also provide employment and educational opportunities for host communities. Furthermore, under the new PIB, oil companies will ensure and encourage developmental programs and infrastructural development in the Niger-Delta region. Finally, deduction of funds from PHCF to repair petroleum facilities damaged by any act of vandalism, sabotage or any other civil unrest will act as an incentive for the communities to take more proactive steps in ensuring pipeline vandalization and theft is substantially reduced in their communities, a welcome novel innovation introduced by the new PIB. The host community reform will substantially reduce /curb restiveness by militants in the Niger Delta region.